MARKET SNAPSHOT:

RESIDENTIAL PROPERTY
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INVESTOR SERIES
HISTORICAL MARKET TRENDS FOR RESIDENTIAL
PROPERTY IN EAST GERMAN CITIES
INTRODUCTION
THIS INFORMATION BOOKLET IS DESIGNED FOR INVESTORS CONSIDERING PURCHASING PROPERTY IN GERMANY FOR
COMMERCIAL PORTFOLIOS AND CONTAINS LARGE AMOUNTS OF MARKET DATA AND TRENDS. IF YOU ARE SIMPLY
PURCHASING A PROPERTY FOR A HOLIDAY HOME/RETIREMENT YOU MAY FIND THE INFORMATION CONTAINED HEREIN OF LITTLE
VALUE.
Property investors always find themselves confronted with the pertinent question of which locations in Germany
offer a stable and secure playing field in the long term.
To give an overview of the market, My German Property LTD publish data of established investment locations in
convenient 'snapshots' to allow you to consider property type and locations quickly at a glance.
This introduction page and the following 2 pages are repeated across the different property type information
leaflets; if you have already it once simply skip this segment overview and head to the main information
starting on page 5
INTRODUCTION
GERMANY: AN OVERVIEW
Compared with other European markets, the German market is considered to be a safe haven for
investment in offce, retail and residential properties. Germany now has a strong position in the commercial real
estate segment, ranking second behind the UK. In 2012, around 25 billion were invested in German
commercial real estate, second only to the UK, with just under 41 billion. France ranked third in 2012 at around
14 billion. Germanys second ranking in commercial transaction volume clearly shows the attractiveness of do-
mestic real estate. At the same time, increasingly higher multipliers also point to a shortage of prime properties
in the large German cities. As premium properties account for only a small slice of the overall market, demand
in other locations will inevitably increase. Germanys polycentric structure which stands in total contrast to the
monocentric structure in France, for example represents a significant investment advantage in this context. In
addition to Germanys seven large cities, there are 73 smaller cities in Germany with more than 100,000
inhabitants that offer interesting investment opportunities. These regional conurbations take on important
functions for their surrounding district with respect to health and education, among other things, which in
turn attracts new residents and businesses.
EAST GERMANY REGIONAL OVERVIEW
A pattern of densely populated growth areas are now emerging in eastern Germany these are areas
that have developed their own sustainable and dynamic economic base. While eastern German regional
centres still lag behind western Germany in terms of absolute economic performance or wealth indicators
such as purchasing power and GDP, they have been catching up fast over the past few years. According to the
2012 City Ranking, published by the Initiative for a New Social Market Economy (INSM) and
WirtschaftsWoche (WiWo a prominent German financial publication), six eastern German cities rank
among the top 10 most dynamic business locations in Germany, with Magdeburg in first place followed by
Rostock and Leipzig in fourth and fifth place respectively. Moreover, the improvement in key indicators
shows that domestic and foreign property investors consider selected cities and regions in eastern Germany to be
an alternative to more established German cities. Key indicators include lower unemployment rates in many
locations, increases in per capita economic output, positive net migration and a growth in visitors overnight
stays.
The upward trend of recent years has been mainly driven by the densely populated cities and regional centres
which can rely on a sustainable economic base. These include Berlin and Potsdam, the Middle German region
around Leipzig and Halle, Saxonys capital Dresden, Thuringias Erfurt and Jena, plus the university and tourist
centres on the Baltic coast around Rostock. These have developed into regions with considerable appeal and
have become attractive investment destinations not only due to risk-return considerations, but also thanks to
growing populations, decreasing unemployment, modern infrastructure and sustainable research and
production networks. The positive momentum of recent years has had a significant long-term impact on real
estate markets. As a result, rents have stabilised or increased, and the recent high vacancy rates have fallen in
many locations, with Berlin, in particular, being one of the main beneficiaries. The growth in population and
the economy is particularly noticeable here, while unemployment and vacancy rates have been
significantly lowered, and selected regions are fast becoming a real alternative to other locations in
Germany.
INTRODUCTION
MICRO ECONOMIC VIEW OF INDIVIDUAL EASTERN GERM AN STATES
Saxony:
With BMW, Porsche and Siemens opening production facilities, Leipzig has enhanced its standing as an
industrial location. In addition, Saxonys largest city has become an important logistics hub. DHL, for
example, uses the Halle/Leipzig airport as its European cargo hub. Such corporate decisions helped to boost the
number of people in employment in Leipzig by 9.6% in the period from 2006 to 2011, which was significantly
higher than the average for the 50 most populous cities in Germany (+4.%) Similar to Leipzig, Dresden, has
established itself as a thriving business location and has made a name for itself as the heart of microelectronics
in Europe. Dresdens microelectronic segment is made up of more than 48,000 employees working for some
1,500 businesses. Dresdens success in attracting such businesses to set up operations here is evident from the
recent decision of the worlds largest supplier of automotive components, Bosch, to open a new development
centre in the city. Bosch has added Dresden to its global development network with centres in Reutlingen,
Munich, Shanghai and Bangalore. At 8.8%, Dresdens unemployment rate is comparably low and a refection
of the citys strong economic performance.
Thuringia:
Besides Leipzig, Erfurt is also an emerging logistics locations in Germany. Over the past three years, food
retailers such as Norma and Netto and the electronics company Panasonic, have set up major logistics centres in
Thuringias provincial capital. Since 2012, major firms such as Koch, Neff & Volckmar (KNV), Redcoon, plus
the shoe wholesaler Zalando all decided to set up their own logistics centres in Erfurt. With its 150 million in-
vestment, the book wholesaler KNV created more than 1,000 jobs here. Similar to Leipzig, Erfurt was able to
significantly improve its position in the local labour market. As a result, the unemployment rate in Thuringias
provincial capital dropped by 5.9 % from 2006 to 2011. This was greater than the average recorded in the most
populous German cities (-3.9 %)
Saxony-Anhalt:
According to the INSM / WiWo 2012 City Ranking, the provincial capital, Magdeburg, recorded the highest
economic growth. Since 2009, the city has seen continuous improvement in its job market and wealth creation.
Magdeburgs excellent position is due to a number of factors, including geographical location on good
trans-port routes, its role as the provincial capital, plus a 150-year tradition of mechanical engineering. Today,
the largest industrial employer is the wind turbine manufacturer Enercon. In addition, a network of research
and development institutions have formed around the Otto-von-Guericke University, with companies from
the fields of neuroscience, medicine and medical technology. The sharp decline in the unemployment rate
between 2006 and 2011 is indicative of the successful structural changes that have taken place in Magdeburg.
Among the 50 most populous cities in Germany, Saxony-Anhalts state capital saw the steepest drop
in the unemployment rate, with joblessness decreasing from 18.8 to 11.6 %.
Mecklenburg-Western Pomerania:
Rostock, the states most populated city, is considered to be one of Mecklenburg- Western Pomeranias
most attractive growth centres. In the INSM/WiWo ranking of the 50 largest German cities, the
Hanseatic city ranks fourth in terms of dynamic performance. Rostocks good ranking is mainly due to the
significant improvement of its labour market indicators. The 11.9 % increase in the number of employees during
the period between 2006 and 2011, and the decrease in the unemployment rate by 5% over the same period,
are mainly attributable to the citys success in attracting businesses to relocate or expand here. The plant ex-
pansion in the port area of Rostock carried out by the crane manufacturer Liebherr is a good example. This
150 million investment alone has created around 700 jobs in the city. While the unemployment rate in Rostock
at 11.6 % remains above the eastern German and national average, unemployment fell again by 0.7 % in
2012 compared with 2011.
Brandenburg:
Potsdam is the most attractive regional centre for investment potential in Berlins immediate surroundings.
The appeal of this provincial capital as a business centre has been on the increase, and it has become
one of the most sought-after locations, especially for companies in the healthcare, media, and information
and communications technology industries. In 2010, Potsdam succeeded in attracting one of the largest
publishing companies for print and electronic media, Tandem Verlag, to locate in the city. In addition, the
software company SAP is currently building its new Innovation Centre in Brandenburgs provincial capital.
After completion, which is planned for 2013, it will provide jobs for 100 new employees. Potsdams
successful settlement policy has resulted in a relatively low unemployment rate of 7.2 % .
RESIDENTIAL PROPERTIES- MARKET SUMMARY
RESIDENTIAL PROPERTY MARKET: STEADY GROWTH IN RENTS AND PRICES
The most expensive places to buy a home are Potsdam, Dresden and Leipzig
Investment in residential property is currently in high demand due to the recent Euro debt crisis and the
associated inflation fears. This, combined with low interest rates, has moved many private investors who
had not previously considered buying a property, to now enter the market.
The market for privately owned houses and apartments experienced a similar development with stable or
rising prices. The most expensive cities here are still Potsdam, Dresden and Leipzig, as well as Jena, Erfurt and
Rostock. According to a study by West & Partners (2012) on investment opportunities in German medium-
sized cities, Jena and Rostock have a particularly attractive risk return profile for residential properties. In
terms of risk, both regional centres are on a par with Cologne, Dsseldorf and Hamburg while delivering a
significantly higher return. Compared with the large cities of Berlin, Frankfurt and Munich, their risk level is
lower at a higher rate of return.
Rents for apartments in modernised old buildings and new buildings remained stable or increased in 2012,
which is a reflection of the positive demographic trend in many eastern German regional centres. In three of
the 22 eastern German cities Potsdam, Stralsund and Wismar rents increased for both modernised old
buildings as well as new build properties.
Accordingly, prices of newly built apartments increased last year in 10 of the 22 analysed eastern German cities
At up to 3,600 per square metre, sale prices for apartments in modernised old buildings in Dresden and
Leipzig are already in the upper price range. The price of newly built apartments here ranges between 4,000
and 4,500 per square metre.
With the exception of Erfurt and Greifswald, prices in all 22 analysed cities have remained stable or increased
when compared with the previous year.
Due to increasing demand, sale prices of detached houses rose in 10 of the 22 analysed locations and in 11 cities,
prices remained stable whereas in Brandenburg an der Havel they declined slightly. Potsdam, Dresden and
Leipzig are again leading the table of cities with the highest property prices, ranging from 490,000
(Leipzig) to 610,000 (Potsdam).
While sale prices in Potsdam stagnated recently, prices in the two booming cities of Dresden and Leipzig rose
year on year. Even in the Thuringian cities of Jena and Erfurt, as well as in Rostock, buyers are expected to pay
at least 400,000 for a detached house. The BBSR expects the population and the number of households in
these cities to increase.
Weimar, the cultural city with its numerous sights, castles and parks, is popular with visitors and increasingly
also with homeowners, which has led to an increase in residential property prices. Of the 22 analysed eastern
German cities, population growth in Weimar is expected to be the second fastest after Potsdam, with its
population increasing by 9% by 2030.
As already mentioned, the population is also expected to grow in Dresden, Erfurt and Jena. Accordingly, sale
prices of up to 250,000 for terraced houses and semi-detached houses are expected to increase further.
Available building land is an important prerequisite for a stable housing market. Last year, building land in
good to excellent locations was in much higher demand. Accordingly, prices charged for good to excellent loca-
tions increased in 10 of the 22 analysed cities. At the same time, prices in fair and average locations remained
mainly constant. Interestingly, land prices in four cities Greifswald, Halle, Jena and Weimar increased
regardless of their location a sign that investors expect these cities to grow in the future. Please refer to our
market snapshot entitled building plots for more information.
POST: PHONE:
MY GERMAN PROPERTY LIMITED USA TOLL FREE: 1855-810-6781
CAPITAL OFFICE, KEMP HOUSE 152-160, UK: (+44) 020 376 91179
LONDON, ENGLAND EC1V 2NX EMAIL:
OR:
MY GERMAN PROPERTY LIMITED ENQUIRIES@MYGERMANPROPERTY.EU
BORSIGSTRASSE 9, 10115, BERLIN GERMANY
ON THE WEB: FACEBOOK:
WWW.MYGERMANPROPERTY.EU FACEBOOK.COM/MYGERMANPROPERTY